Tensions in the housing market


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Much like the wider tension we are seeing in society more generally, there are some specific tensions in the housing market. These centre around some long-standing themes that have come sharply into focus in the last week or so.

I’m slowly recovering from a rare Saturday night out – out, watching Pete Tong & The Heritage Orchestra at the O2. It’s been a long while indeed since Mrs. Campo and myself had a Saturday night out in town. Thankfully it was an age-appropriate crowd who really enjoyed rolling back the years by the look of it… 👀. It was yet another reminder that in my head I am still 21, but my body reminded me that I am actually 41 based on the aches and pains today. The scary thing is I barely had anything to drink, I was actually just tired after a late night and an early kick-off for my daughter’s football today!

It was a very welcome respite from the underlying tension that I have been feeling in the last week. Whenever the narrative around covid ramps up, so does the stress for many. The crowd last night very much had a feeling of pent-up exuberance, that really hasn’t been the case in more general terms through the week. I really do hope the vaccines and steps taken don’t lead to yet another lockdown Chrimbo. The stats are encouraging and I hope that holds out.

Equally, some old tensions are playing out in the housing market which is the theme of this weeks email:

Housing Tensions

There are three specific tensions in the housing market, which have been around for some time, that have come to prominence recently:

  • Busiest year in the housing market since 2007

    • Figures from Zoopla confirm that it has been the busiest year for property transactions for 14 years. A whopping 1 in 16 homes in the UK will have changed hands by the end of the year. Which is keeping the annual rate of growth at 6.9%. At a regional level, Wales continues its eight-month run of registering the highest rate of house price growth, up at 10.8%, followed by the North West of England at 9.%. London offers a sharp contrast; after being most affected by the pandemic and subsequent lockdowns, it is registering a more modest price growth of 2.3%. House price growth continues to be underpinned by the supply and demand imbalance, with buyer demand running at 28% above the five-year average. By contrast, the supply of homes being listed for sale this year has been running between 5% and 10% below the 2017-2019 average.
    • Half of First Time Buyers experience house purchase fall through

      • Closely linked to the above point, as the market is so competitive, figures from Aldermore (a mortgage lender) showed that 49% of First Time Buyers have experienced a house purchase fall through since the start of the Pandemic in March 2020. This will largely be down to being outbid but also taking longer than planned to get the mortgage organised is a key factor when vendors are working in a red hot market and do not want to wait. This is something we experience on a daily basis, either clients being referred to us as they have been let down elsewhere, or run into unexpected hurdles. All of which wastes time and jeopardises the purchase.
      • If you are looking at moving, we would strongly urge you to pick up with us as early as possible, so we can get the lending agreed AHEAD of finding a new property to buy, as if there are any kinks in the process, we have time to iron them out BEFORE it ever becomes an issue with an unreasonable seller… It really is worth bearing in mind that even if you think your situation is simple, mortgage lending sadly is not. If you get bonuses, have been out of the UK, or moved roles, it may be more complicated to organise the mortgage than you think. Not an issue, as these things can all be overcome, but even wasting days and weeks can risk the purchase you want to make.
    • House price to earnings reaches record high

      • Figures from IMLA (the Intermediary Mortgage Lenders Association) have shown that the average property is now 8.8 x the average income. This is a really key metric that often determines how affordable homes really are, and as house price growth has consistently outstripped wage growth for a while now, we have reached this new tipping point.
      • Also, the figures confirm that buying is much cheaper than renting. The average mortgage repayment takes up 16.7% of the borrower’s income, while rent takes up 25%. As touched on above, with house prices continuing to march on, and mortgage rates not set to go too high, it seems more affordable to buy, but that will get out of reach for some if their earnings do not keep pace with the market. So whatever 2022 holds, it does not make sense to delay a purchase any longer than necessary.

    Rate Corner

    Money markets all nudged back down again which has been the theme of recent weeks. It will be interesting to see if the Bank of England does raise the base rate as expected in a few weeks.

    That said, the long-term trend is certainly up on mortgage and market rates, so it is very much a matter of when, not if, the base rate starts to climb.

    Therefore, our default position stands, unless you have any specific needs, we would most likely recommend a longer-term fixed rate if you have a 25% + deposit/equity, but keep it short term or flexible if less than that figure. 

    In the last week:
    3 Month Sterling = down by 0.022 at 0.097%
    2 Year SWAP = down by 0.073% at 1.064%
    5 Year SWAP = up by 0.130% to 1.166%
    Bank of England Base Rate = Held at 0.10%

    Tensions in the housing market

    Best Rates

    2 Year Variable from 0.51%
    2 Year Fixed Rates from 0.89%
    5 Year Fixed Rates from 1.32%
    BTL Rates from 0.99%

    The actual rate you will be offered will be dependent on your personal circumstance and deposit level. Please speak to one of our advisers so that they can guide you through this process
    Source: Twenty7Tec December 2021

    If you would like more information on tensions in the housing market or would like to discuss your mortgage optionsplease speak to one of our advisers.